Written Testimony
Jonathan Davis, President of SEMI North America
U.S. House of Representatives
Committee on Ways and Means
April 14, 2010

Chairman Levin, Ranking Member Camp, thank you for allowing me to submit testimony to the Committee on Ways and Means regarding energy tax policy.

My name is Jonathan Davis and I serve as the President of North America for Semiconductor Equipment and Materials International (SEMI). Although we are a global organization, SEMI represents about 425 U.S. companies in the $50 billion worldwide semiconductor equipment and materials industries. These companies supply the enabling technologies, including raw materials and advanced tools, to produce every semiconductor-based product from cell phones to computers.

In addition to these products, our members also provide a base for emerging technologies such as solar photovoltaic (PV) and nanotechnology, including solid state lighting (SSL). That is why in 2008 SEMI members involved in solar energy/PV manufacturing formed the SEMI PV Group to address the opportunities and obstacles of bringing low-cost PV technology and sustainable clean energy to the world. As such, it is with our members concerns in the solar and energy efficiency industry that I submit these comments to you today.

SEMI and our members were pleased with the alternative energy investment sections of the American Recovery and Reinvestment Act (ARRA), and in particular with the Advanced Energy Manufacturing Tax Credit (MTC) and the Section 1603 payments in lieu of tax credit program as applied to the Investment Tax Credit (ITC). Both of these programs go a long way in helping to establish a more substantial base for domestic production of solar panels, and in helping consumers offset the cost of installing solar panels in their homes. The end result of both more manufacturing capacity and more installations is, of course, more jobs, cleaner electricity, and less dependence on foreign sources of energy. In fact, solar PV creates more jobs per installed megawatt (MW) than any other competitive renewable energy source.ⁱ

So, how do we ensure that these programs are living up to their full potential and creating the most jobs possible?

When it comes to the MTC, there can be no doubt of the popularity of this program within the manufacturing community. Although ARRA capped the program at $2.3 billion, the Treasury received over $8 billion in eligible applications. This excess need represents thousands of jobs that could be produced, and many more billions of dollars in private investment left out of the economy. While some SEMI member companies were fortunate to receive the MTC, others were shut out, with a great deal of disappointment and lost opportunity. At this point in our nation’s economic recovery, it is imperative that we have an “all hands on deck” approach, and that is why SEMI advocates for the removal of the cap on the MTC.

Removing the cap will allow billions upon billions of dollars of private investment to leverage this tax credit and build up America’s renewable energy manufacturing base. A recent report by the Pew Charitable Trust revealed that while the U.S. was number two globally in total investment in renewable energy technology at $18.6 billion in 2009, we are a distant second to China which invested almost double that amount ($34.6 billion). We need to close this gap, and quickly, if we are going to be competitive in the race to improve, manufacture, and install renewable energy sources. This will have an impact not only on those companies that produce solar panels, but also will increase investment and job creation across the supply chain, including equipment makers and material providers.

Although solar PV technology was created here in the United States, our share of the global manufacturing capacity is only 6%, or .5 gigawatts (GW). Simply put, it’s not enough capacity to meet even our domestic demand for solar PV. According to estimates, the U.S. will install twice as much solar PV in 2010 than we have the capacity to produce, and the demand only continues to grow from there.ⁱⁱ By 2016, it is estimated that the U.S. will install 6 GW, or twelve times the current capacity of our domestic production.ⁱⁱⁱ If the jobs to meet this demand aren’t in the America, that’s a lost opportunity of over 80,000 jobs.

In addition to solar PV, SEMI members are increasingly ramping up efforts to bring lower cost, high efficiency solid state lighting (SSL) to the American consumer. The Department of Energy (DOE) expects SSL to completely displace all other technologies in commercial, residential, industrial and outdoor segments by 2030. They estimate this will save 1,488 terawatt-hours of energy representing a savings of $120 billion at today's energy prices.

The real challenge in making this happen, however, is being able to increase our domestic manufacturing capacity for SSL technologies, such as light emitting diodes (LED’s). Again, by removing the cap on the MTC, our members would be able to leverage this tax credit to pour billions of dollars of private investment into increased produced of LED’s, lowering the price, and greatly helping to reduce the amount of electricity we use for lighting. While our members are grateful for those MTC that LED companies received as part of ARRA, there is still plenty of unmet need in developing our domestic manufacturing capability in this area.

In addition to building up our manufacturing base, solar PV also needs to be price competitive in order to reach a sustainable level of deployment in the United States. While the ITC program has been a good driver, under the current economic circumstances SEMI believes that it is vital to continue the Section 1603 grants in lieu of credit program to provide the necessary up front capital for installation of renewable energy technologies.

With this program set to expire at the end of 2010, we are quickly approaching a cliff that will severely hamper the growth in solar PV installations. It is SEMI’s belief that the Section 1603 program should be extended to 2012, which will allow continued growth, while providing sorely needed upfront capital for solar installation projects. It would be an unfortunate mistake to cut this successful program out at the knees, before it has a chance to make its full impact in the creation of jobs in our country. The current 2010 expiration date doesn’t allow for a long enough time period for this provision to have the maximum impact on creating more renewable energy projects. By extending this program for an additional two years, more large scale renewable energy projects will be ready to begin construction and take full advantage of the program.

Mr. Chairman and Ranking Member, again I thank you for allowing SEMI to submit this testimony, and I hope you will consider our requests. SEMI member companies are very proud of their contributions to the American economy, and we hope to be able to work closely with this committee as it continues to work on policies that support the growth of the renewable energy here in the United States.